What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 84 added, 68 removed, 649 unchanged (19% of the section changed)

3 unchanged sentences

(In thousands) (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from financing activities, net of effects of business combination:

4 unchanged sentences

( 3,128,950 )

Proceeds from issuance of subordinated notes

Dividends paid

1 unchanged sentence

Repurchase of common stock

Net cash provided by (used in) financing activities

Net cash used in financing activities

Net decrease in cash and cash equivalents

19 unchanged sentences

The Bank operates as a full-service financial institution with a primary market area including, but not limited to, the counties in which the Bank’s branches are located.

The Bank has twenty-eight locations located in Manitowoc, Outagamie, Brown, Winnebago, Sheboygan, Shawano, Waupaca, Ozaukee, Monroe, Fond du Lac, Waushara, Columbia and Jefferson counties in Wisconsin.

The Bank has twenty-six locations located in Manitowoc, Outagamie, Brown, Winnebago, Sheboygan, Shawano, Waupaca, Ozaukee, Monroe, Fond du Lac, Waushara, Dane, Columbia and Jefferson counties in Wisconsin.

The Company and Bank are subject to the regulations of certain federal agencies and undergo periodic examinations by those regulatory authorities.

121 unchanged sentences

The Company has been diligent in responding to reference rate reform and does not anticipate a significant impact to its financial statements as a result.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements.

This ASU modifies the dis closure or presentation requirements of a variety of Topics in the Codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

The effective date for each amendment will be the date on which the Security and Exchange Commission’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

If, by June 30, 2027, the Securities and Exchange Commission has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity.

The Company does not anticipate a significant impact to its financial statement disclosures as a result of this ASU.

NOTE 2 – ACQUISITIONS

1 unchanged sentence

(“Hometown”), a bank holding company headquartered in Fond du Lac, Wisconsin, pursuant to the Agreement and Plan of Bank Merger (“Merger Agreement”), dated as of July 25, 2022 by and among the Company and Hometown, whereby Hometown merged with and into the Company, and Hometown Bank, Hometown’s wholly-owned banking subsidiary, merged with and into the Bank.

Hometown’s principal activity was the ownership and operation of Hometown Bank, a state-chartered banking institution that operated ten ( 10 ) branches in Wisconsin at the time of closing.

Hometown’s principal activity was the

ownership and operation of Hometown Bank, a state-chartered banking institution that operated ten ( 10 ) branches in Wisconsin at the time of closing.

The merger consideration totaled approximately $ 130.5 million.

32 unchanged sentences

Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings.

There were no anti-dilutive stock options for the six months ended June 30, 2023 or 2022.

There were no anti-dilutive stock options for the nine months ended September 30, 2023 or 2022.

The following table presents the factors used in the earnings per share computations for the period indicated:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

14 unchanged sentences

The following is a summary of available for sale securities:

June 30, 2023

September 30, 2023

Treasury securities

16 unchanged sentences

The following is a summary of held to maturity securities:

June 30, 2023

September 30, 2023

Treasury securities

8 unchanged sentences

Greater Than 12 Months

June 30, 2023 - Available for Sale

September 30, 2023 - Available for Sale

Treasury securities

5 unchanged sentences

Certificate of Deposits

June 30, 2023 - Held to Maturity

September 30, 2023 - Held to Maturity

Treasury securities

11 unchanged sentences

Obligations of states and political subdivisions

As of June 30, 2023, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired.

As of September 30, 2023, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired.

This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to these securities.

The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities.

The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity.

As of September 30, 2023, the Company did not intend to sell these securities and it was more likely than not that the Company would not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity.

The unrealized losses have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration.

Furthermore, based on its analysis the Company has determined that held to maturity securities have zero expected credit losses.

Treasury securities have the full faith and credit backing of the United States Government and the amount of Obligations of states and political subdivisions at June 30, 2023 are not material to the financial statements.

The following is a summary of amortized cost and estimated fair value of securities by contractual maturity as of June 30, 2023.

Treasury securities have the full faith and credit backing of the United States Government and the amount of Obligations of states and political subdivisions in an unrealized loss position at September 30, 2023 are not material to the financial statements.

The following is a summary of amortized cost and estimated fair value of securities by contractual maturity as of September 30, 2023.

Contractual maturities will differ from expected maturities for mortgage-backed securities because borrowers may have the right to call or prepay obligations without penalties.

6 unchanged sentences

Mortgage-backed securities

As of June 30, 2023 and December 31, 2022, the carrying values of securities pledged to secure public deposits, securities sold under repurchase agreements, and for other purposes required or permitted by law were approximately $ 161.8 million and $ 226.9 million, respectively.

Sales of securities available for sale produced $ 34.2 million in proceeds, $ 0.1 million in gross gains and $ 0.2 million in gross losses for the six months ended June 30, 2023.

There were no sales of securities during the six months ended June 30, 2022.

As of September 30, 2023 and December 31, 2022, the carrying values of securities pledged to secure public deposits, securities sold under repurchase agreements, and for other purposes required or permitted by law were approximately $ 148.4 million and $ 226.9 million, respectively.

Sales of securities available for sale produced $ 34.2 million in proceeds, $ 0.1 million in gross gains and $ 0.2 million in gross losses for the nine months ended September 30, 2023.

There were no sales of securities during the nine months ended September 30, 2022.

NOTE 5 – LOANS, ALLOWANCE FOR CREDIT LOSSES, AND CREDIT QUALITY

The following table presents total loans by portfolio segment and class of loan as of June 30, 2023 and December 31, 2022:

The following table presents total loans by portfolio segment and class of loan as of September 30, 2023 and December 31, 2022:

Commercial/industrial

17 unchanged sentences

Specific allocations of the ACL for credit losses on individually evaluated loans are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

A summary of the activity in the ACL - Loans by loan type as of June 30, 2023 is summarized as follows:

A summary of the activity in the ACL - Loans by loan type for the nine-months ended September 30, 2023 is summarized as follows:

Real Estate -

3 unchanged sentences

ACL - Loans on PCD loans acquired

ACL - Loans - June 30, 2023

A summary of the activity in the allowance for loan losses (“ALL”) by loan type as of June 30, 2022 is as follows:

ACL - Loans - September 30, 2023

A summary of the activity in the allowance for loan losses (“ALL”) by loan type for the nine-months ended September 30, 2022 is as follows:

Real Estate -

1 unchanged sentence

ALL - January 1, 2022

ALL June 30, 2022

ALL September 30, 2022

ALL ending balance individually evaluated for impairment

ALL ending balance collectively evaluated for impairment

Loans outstanding - June 30, 2022

Loans outstanding - September 30, 2022

Loans ending balance individually evaluated for impairment

2 unchanged sentences

This allowance is maintained to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans.

The ACL - Unfunded Commitments was $ 3.5 million at June 30, 2023.

The ACL - Unfunded Commitments was $ 3.5 million at September 30, 2023.

See Note 10 for further information on commitments.

1 unchanged sentence

The following table presents the components of the provision for credit losses.

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

December 31, 2022

2 unchanged sentences

Total provision for credit losses

The Company’s past due and non-accrual loans as of June 30, 2023 is summarized as follows:

The Company’s past due and non-accrual loans as of September 30, 2023 is summarized as follows:

allocated ACL

10 unchanged sentences

Residential 1‑4 family

Interest recognized on non-accrual loans is considered immaterial to the consolidated financial statements for the six months ended June 30, 2023 and 2022.

Interest recognized on non-accrual loans is considered immaterial to the consolidated financial statements for the nine months ended September 30, 2023 and 2022.

A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial

6 unchanged sentences

Collateral Type

As of June 30, 2023

As of September 30, 2023

Business Assets

40 unchanged sentences

Amortized Cost Basis by Origination Year

As of June 30, 2023

As of September 30, 2023

Commercial/industrial

17 unchanged sentences

On January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting guidance for TDRs by creditors and enhanced the disclosure requirements for certain loan modifications to borrowers experiencing financial difficulty.

Loans that were both experiencing financial difficulty and were modified during the six months ended June 30, 2023, were insignificant to these consolidated financial statements.

The Company also had no new TDRs during the six months ended June 30, 2022.

Loans that were both experiencing financial difficulty and were modified during the nine months ended September 30, 2023, were insignificant to these consolidated financial statements.

The Company also had no new TDRs during the nine months ended September 30, 2022.

The following tables present loans acquired with deteriorated credit quality and the change in the accretable and non-accretable components of the related discounts prior to the adoption of ASU 2016-13.

5 unchanged sentences

Residential 1‑4 family

June 30, 2022

September 30, 2022

December 31, 2022

17 unchanged sentences

Following is an analysis of activity in the MSR asset:

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023

December 31, 2022

8 unchanged sentences

Mortgage servicing rights as a percent of loans serviced for others

The primary economic assumptions utilized by the Company in measuring the value of MSRs were constant prepayment speeds of 7.9 and 7.9 months as of June 30, 2023 and December 31, 2022 and discount rates of 10.20 % and 10.21 % as of each of those periods, respectively.

The primary economic assumptions utilized by the Company in measuring the value of MSRs were constant prepayment speeds of 7.7 and 7.9 months as of September 30, 2023 and December 31, 2022 and discount rates of 10.19 % and 10.21 % as of each of those periods, respectively.

NOTE 7 – NOTES PAYABLE

From time to time the Company utilizes FHLB advances to fund liquidity.

At June 30, 2023 and December 31, 2022, the Company had outstanding balances borrowed from the FHLB of $ 36.1 million and $ 1.9 million, respectively.

At September 30, 2023 and December 31, 2022, the Company had outstanding balances borrowed from the FHLB of $ 36.1 million and $ 1.9 million, respectively.

The advances, rate, and maturities of FHLB advances were as follows:

September 30,

Fixed rate, fixed term

7 unchanged sentences

Future maturities of borrowings were as follows:

September 30,

1 year or less

As of June 30, 2023, the Company had borrowing availability at the FHLB totaling $ 775.6 million in addition to the existing borrowings noted in the tables above.

As of September 30, 2023, the Company had borrowing availability at the FHLB totaling $ 773.6 million in addition to the existing borrowings noted in the tables above.

The Company maintains a $ 7.5 million line of credit with a commercial bank, which was entered into on May 15, 2022.

There were no outstanding balances on this note at June 30, 2023 or December 31, 2022.

There were no outstanding balances on this note at September 30, 2023 or December 31, 2022.

Any future borrowings will require monthly payments of interest at a variable rate, and will be due in full on May 15, 2024.

1 unchanged sentence

During September 2017, the Company entered into subordinated note agreements with three separate commercial banks.

The Company had outstanding balances of $ 11.5 million under these agreements as of June 30, 2023 and December 31, 2022.

The Company had outstanding balances of $ 11.5 million under these agreements as of September 30, 2023 and December 31, 2022.

These notes were all issued with 10 -year maturities, carry interest at a variable rate payable quarterly, are callable on or after the sixth anniversary of the issuance dates, and qualify for Tier 2 capital for regulatory purposes.

See Note 14 for information regarding activity related to these notes subsequent to September 30, 2023.

During July 2020, the Company entered into subordinated note agreements with two separate commercial banks.

The Company had outstanding balances of $ 6.0 million under these agreements as of June 30, 2023 and December 31, 2022.

The Company had outstanding balances of $ 6.0 million under these agreements as of September 30, 2023 and December 31, 2022.

These notes were issued with 10 -year maturities, carry interest at a fixed rate of 5.0 % through June 30, 2025, and at a variable rate thereafter, payable quarterly.

1 unchanged sentence

During August 2022, the Company entered into subordinated note agreements with an individual.

The Company had outstanding balances of $ 6.0 million under these agreements as of June 30, 2023.

The Company had outstanding balances of $ 6.0 million under these agreements as of September 30, 2023.

These notes were issued with 10 -year maturities, carry interest at a fixed rate of 5.25 % through August 6, 2027, and at a variable rate thereafter, payable quarterly.

11 unchanged sentences

Interest on all debentures is current.

Applicable discounts (initially recorded to carry the acquired debentures at their then estimated fair value) are being accreted to interest expense over the remaining life of the debentures, and total $ 1.4 million at June 30, 2023.

NOTE 9 – REGULATORY MATTERS

9 unchanged sentences

Under regulatory guidance for non-advanced approaches institutions, the Bank is required to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets, including an additional conservation buffer determined by banking regulators.

As of June 30, 2023 and December 31, 2022, this buffer was 2.5 %.

The Bank met all capital adequacy requirements to which they are subject as of June 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022, this buffer was 2.5 %.

The Bank met all capital adequacy requirements to which they are subject as of September 30, 2023 and December 31, 2022.

Actual and required capital amounts and ratios are presented below at period-end:

6 unchanged sentences

Action Provisions

June 30, 2023

September 30, 2023

Total capital (to risk-weighted assets):

12 unchanged sentences

Fair value is based on fees currently charged to enter into similar agreements and for fixed rate commitments also considers the difference between current levels of interest rates and committed rates.

The notional amount of rate-lock commitments at June 30, 2023 and December 31, 2022 was approximately $ 9.2 million and $ 3.7 million, respectively.

The notional amount of rate-lock commitments at September 30, 2023 and December 31, 2022 was approximately $ 10.4 million and $ 3.7 million, respectively.

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

5 unchanged sentences

Notional Amount

June 30, 2023

September 30, 2023

December 31, 2022

12 unchanged sentences

for Identical

June 30, 2023

September 30, 2023

Securities available for sale

21 unchanged sentences

for Identical

June 30, 2023

September 30, 2023

Loans individually evaluated, net of reserve

6 unchanged sentences

Valuation Technique

As of June 30, 2023

As of September 30, 2023

Other real estate owned

11 unchanged sentences

Collateral discounts and discount rates

The carrying value and estimated fair value of financial instruments at June 30, 2023 and December 31, 2022 follows:

June 30, 2023

The carrying value and estimated fair value of financial instruments at September 30, 2023 and December 31, 2022 follows:

September 30, 2023

Financial assets:

43 unchanged sentences

The number of shares of Company stock that may be issued pursuant to awards under the 2020 Plan shall not exceed, in the aggregate, 700,000 .

As of June 30, 2023, 76,641 shares of Company stock have been awarded under the 2020 Plan.

As of September 30, 2023, 76,373 shares of Company stock have been awarded under the 2020 Plan.

Compensation expense for restricted stock is based on the fair value of the awards of Bank First Corporation common stock at the time of grant.

The value of restricted stock grants that are expected to vest is amortized into expense over the vesting periods.

For the six months ended June 30, 2023 and 2022, compensation expense of $ 1.0 million and $ 0.8 million, respectively, was recognized related to restricted stock awards.

As of June 30, 2023, there was $ 3.1 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan.

For the nine months ended September 30, 2023 and 2022, compensation expense of $ 1.6 million and $ 1.2 million, respectively, was recognized related to restricted stock awards.

As of September 30, 2023, there was $ 2.6 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan.

That cost is expected to be recognized over a weighted average period of 1.58 years.

The aggregate grant date fair value of restricted stock awards that vested during the six months ended June 30, 2023, was approximately $ 1.6 million.

For the year ended

June 30, 2023

June 30, 2022

The aggregate grant date fair value of restricted stock awards that vested during the nine months ended September 30, 2023, was approximately $ 1.6 million.

For the period ended

September 30, 2023

September 30, 2022

Average Grant-

21 unchanged sentences

The Company is electing to utilize the Wall Street Journal Prime Rate on the date of lease commencement.

Six Months Ended

Nine Months Ended

(dollars in thousands)

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Amortization of ROU Assets - Operating Leases

3 unchanged sentences

Weighted Average Discount Rate - Operating Leases

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of June 30, 2023 is as follows:

June 30, 2023

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of September 30, 2023 is as follows:

September 30, 2023

Operating lease payments due:

8 unchanged sentences

Total operating lease liabilities

NOTE 14 – SUBSEQUENT EVENTS

The Bank sold 100 % of its member interest in UFS, LLC in a transaction which closed on October 1, 2023.

The transaction resulted in proceeds of $ 52.2 million and a pre-tax gain of $ 39.3 million which will be realized during the fourth quarter of 2023.

The Bank repaid $ 11.5 million in subordinated notes on October 2, 2023.

These notes were originated during September 2017 and qualified for Tier 2 capital for regulatory purposes.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements